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USD/CNH could move into a consolidative phase in the near-term ahead of potential pullbacks, in opinion of FX Strategists at UOB Group.

Key Quotes

24-hour view: “USD plunged to 6.3768 yesterday before rebounding. The sharp and rapid drop appears to be overdone and USD is unlikely to weaken much further. For today, USD is more likely to consolidate, expected to be within a 6.3740/6.3960 range.”

Next 1-3 weeks: “In our latest update on Tuesday (25 May, spot at 6.4125), we highlighted that ‘downward momentum has picked up and the risk is for USD to break the major support at 6.4015’. We added, ‘a daily closing below 6.4015 would indicate that USD could decline towards the next support at 6.3800’. USD subsequently cracked 6.4015 and while it not did close below 6.4015, it plunged to 6.3768 yesterday (26 May). Strong downward momentum suggests that USD could weaken further to 6.3550. That said, shorter-term conditions are deeply oversold and this could lead to a couple of days of consolidation first. Overall, the risk for USD remains on the downside unless it can move above 6.4150 (‘strong resistance’ level previously at 6.4300).”